Wednesday, June 26, 2013

My opinion about Madrid 2020

The Brazilian financial newspaper Valor Económico has asked me a few questions about the bid by Madrid to organize the 2020 Olympic Games. Here are the questions and my answers.

- As an economist, do you support Madrid's bid for the
Olympic Games?

As an economist, it is not my job to support Madrid’s
bid or not, that is up to the people of Madrid and their representatives. As
economists, our role is to point out that there is a large scientific
literature, with sympathies in the financial press (such as The Economist or
the Financial Times), which has found that, in general, Olympic Games have more
social costs than social benefits.

- Do you think Madrid-2020 could repeat the success of Barcelona-92?

That is very difficult, although of course not
impossible. The Barcelona games were very successful and very popular, although
they also experienced large cost overruns and it took a long time to fully pay
for them. There is a legacy of good roads and beaches, but also of expensive
underutilized sports facilities. The tourist boom could have been achieved with
a less costly promotion. But in general, the Barcelona games were better
managed than other sports mega events, there was no corruption and they were
associated to a project of urban renewal (which probably would also have taken
place without the games, but more slowly, which is not necessarily a bad
thing). Perhaps the Madrid Olympics could hire some of the Barcelona executives
that are still active.

- From here in Brazil, it seems to me there's great popular support for
Madrid-2020 and very little dissenting voices. Am I correct? If so, in your
opinion, why is that the Spaniards don't share Mario Monti's stance that Rome
couldn't afford the Games due to the economic crisis?

That is probably a correct appreciation. I had sympathy
for Monti when he took that decision. The last thing that Rome needs now is the
organization of the Olympic Games. Rome does not need to be put in the map.
Spaniards in general are crazy about sports and parties (and the Olympic Games
are a big party), and many people in Madrid do not like falling behind
Barcelona, probably. Still, I can hear more dissenting voices now about Madrid
than in 1992 about Barcelona.

- The government says that the Games would cost around 1,7 billion euros. Do
you think this sum would be the final cost? If not, what would be your guess?

That will probably not be the final cost. All mega
sporting events have large cost overruns until the end, and I doubt that these
will be an exception. The organizing city becomes hostage of the sports
governing bodies (the IOC in this case), and there is a lot of pressure to
spend any amount of money and no pressure to control costs, once the games are
awarded. Unfortunately, I’m not in the guessing business: I would need to have
a lot of information to make an estimation of the final cost.

- Madrid city has a 7,4 billion euros debt and Madrid regional government has a
21,9 billion euros debt. Wouldn't the Games have an enormous impact on their
finances?

They will have an enormous impact on their finances,
although many of the infrastructure has already been built. Madrid is a
wonderful city and probably does not need the Olympic Games. But I insist that
it is up to them to decide. They should be well informed that the Olympic Games
are an expensive party (economically, it is more an act of consumption than an
act of investment), and that they cost public funds that would be valuable in
alternative projects (education, health, social policies). Once informed about
the true costs, if they democratically decide to go ahead, we economists should
not have much more to say.